Case Study

Blue Ocean Hackathon:

Market Creation in a Highly Competitive Industry

1
The case study revolves around Bora, a traveler from South Korea who experienced a
common issue faced by package tour customers in the Korean travel industry. The
competitive nature of the travel agencies has led to a decrease in package tour prices, making
them an attractive option for customers. However, the low upfront costs often result in
additional expenses for travelers due to forced shopping, high-pressure activities, and
mandatory tipping.

The Korean travel industry has seen significant growth, with a preference for package tours
among customers who value convenience and a guided experience. However, as the purpose
of travel has shifted from sightseeing to experiencing, an increasing number of travelers are
opting for independent travel facilitated by online information and booking platforms.

The structure of the package tour industry involves Korean travel agencies developing,
advertising, and selling tour products, which are then delivered by inbound travel operators in
destination countries. The top travel agencies, such as Hana Tour and Mode Tour, dominate
the market, while smaller agencies focus on niche markets. The competition has led to a
downward trend in package tour prices, resulting in challenges for maintaining profitability.

Customers, especially those on budget tours, often face compulsory shopping trips and
optional activities that inflate their overall expenses. Dissatisfaction among customers has led
to a decline in loyalty, with many turning to independent travel options. Travel agencies face
the challenge of retaining their share in a shrinking demand for package tours.

The case study concludes by posing questions about potential strategies for travel agencies to
achieve profitable growth in a market characterized by intense competition and evolving
customer preferences. It introduces the concept of a Blue Ocean Hackathon, encouraging
teams to explore hidden demand, identify noncustomers, and create a new strategic profile to
break the value-cost trade-off in the Korean travel industry.
2
Summary of the Case Study:

The case study revolves around Bora, a traveler in South Korea who opted for a package tour
to Sydney, Australia. The competitive travel industry in Korea offers package tours at prices
lower than the average airfare to attract customers. However, the study highlights the
downsides of these tours, where customers end up spending extra money on forced shopping,
high-pressure activities, and compulsory tipping.

The Korean travel industry has seen significant growth over the years, with a high percentage
of Koreans traveling abroad. Travelers typically choose between package tours and
independent travel, each offering a distinct experience. Package tours provide convenience,
efficiency, and security, while independent travel offers freedom, flexibility, and
customization.

The package tour industry in Korea involves travel agencies developing, advertising, and
selling tours, which are then delivered by inbound travel operators and guides in destination
countries. The industry faces intense competition, leading to price drops over time. The top
travel agencies dominate the market, with a focus on undifferentiated package tours.

As competition increases, travel agencies reduce fees for inbound travel operators, impacting
the quality of tour services and guides' wages. Compulsory shopping trips and optional extras
become common, leading to customer dissatisfaction. The study indicates that frustrated
customers are increasingly shifting towards independent travel, facilitated by online
resources.

The case study concludes by introducing the Blue Ocean Hackathon, a hands-on exercise for
formulating a market-creating strategy in Korea's crowded travel industry. The exercise
involves discovering hidden blocks to utilities, identifying noncustomers, exploring ways to
reconstruct market boundaries, and creating a new strategic profile to break the value-cost
trade-off.

In summary, the case study sheds light on the challenges faced by package tours in Korea,
driven by intense competition, cost pressures, and dissatisfied customers. It encourages
exploring innovative strategies, as presented in the Blue Ocean Hackathon, to create a new
market space and address the evolving needs of travelers.
3
**Summary of the Case Study: "Blue Ocean Strategy in the Korean Travel Industry"**

**Introduction:**
The case study explores the challenges and dynamics of the Korean travel industry, focusing
on the prevalent issues in package tours. Bora's experience serves as a microcosm of the
common grievances faced by package tourists in South Korea. The industry has seen
exponential growth, with a significant shift from sightseeing-focused tours to a desire for
experiential travel.

**Overview of the Travel Industry in Korea (2012):**

- The Visa Global Travel Intentions Study 2015 highlights that Koreans travel abroad more
frequently than Chinese and Japanese.
- The travel industry has grown rapidly, offering cheaper and more varied tour products.
- Travelers typically choose between package tours and independent travel, each offering
distinct advantages and disadvantages.

**Package Tour Industry:**

- Package tours, integrating flights, transfers, accommodations, meals, and activities,
dominate the market.
- The top 10 travel agencies control 50% of the market, with Hana Tour and Mode Tour
holding over 50% of the package tour market.
- Small agencies focus on niche markets, while some local operators organize on-site tours
independently.

**Competition in the Package Tour Industry:**

- Market segmentation by price is a common strategy, but undifferentiated products lead to
heavy marketing expenses.
- Intense competition has driven down prices, resulting in reduced profit margins for travel
agencies.
- Travel agencies lower fees for inbound operators, impacting the quality of services
provided.

**Disgruntled Customers and Changing Trends:**

- Package tourists often face compulsory shopping trips, optional tours, and tipping, leading
to dissatisfaction.
- Customers end up spending more than anticipated, especially on low-cost package tours.
- Growing frustration has led to an exodus of customers to the independent travel market.

**Blue Ocean Hackathon: Hands-on Exercise:**

- The case study concludes with a call for a Blue Ocean Hackathon, encouraging students to
explore a market-creating strategy.
- The exercise involves discovering hidden blocks to utility, identifying noncustomers,
reconstructing market boundaries, breaking value-cost trade-offs, and envisioning a new
strategy.

**Conclusion:**
The Korean travel industry faces challenges stemming from intense competition, dissatisfied
customers, and changing preferences. The call for a Blue Ocean strategy emphasizes the need
for innovative approaches to unlock hidden demand and create a new market space in the
crowded travel industry.

4
**Summary of the Case Study: "Blue Ocean Strategy in the Korean Travel Industry"**

**Introduction:**
The case study explores the challenges and dynamics of the Korean travel industry, focusing
on the prevalent issues in package tours. Bora's experience serves as a microcosm of the
common grievances faced by package tourists in South Korea. The industry has seen
exponential growth, with a significant shift from sightseeing-focused tours to a desire for
experiential travel.

**Overview of the Travel Industry in Korea (2012):**

- The Visa Global Travel Intentions Study 2015 highlights that Koreans travel abroad more
frequently than Chinese and Japanese.
- The travel industry has grown rapidly, offering cheaper and more varied tour products.
- Travelers typically choose between package tours and independent travel, each offering
distinct advantages and disadvantages.
**Package Tour Industry:**
- Package tours, integrating flights, transfers, accommodations, meals, and activities,
dominate the market.
- The top 10 travel agencies control 50% of the market, with Hana Tour and Mode Tour
holding over 50% of the package tour market.
- Small agencies focus on niche markets, while some local operators organize on-site tours
independently.

**Competition in the Package Tour Industry:**

- Market segmentation by price is a common strategy, but undifferentiated products lead to
heavy marketing expenses.
- Intense competition has driven down prices, resulting in reduced profit margins for travel
agencies.
- Travel agencies lower fees for inbound operators, impacting the quality of services
provided.

**Disgruntled Customers and Changing Trends:**

- Package tourists often face compulsory shopping trips, optional tours, and tipping, leading
to dissatisfaction.
- Customers end up spending more than anticipated, especially on low-cost package tours.
- Growing frustration has led to an exodus of customers to the independent travel market.

**Blue Ocean Hackathon: Hands-on Exercise:**

- The case study concludes with a call for a Blue Ocean Hackathon, encouraging students to
explore a market-creating strategy.
- The exercise involves discovering hidden blocks to utility, identifying noncustomers,
reconstructing market boundaries, breaking value-cost trade-offs, and envisioning a new
strategy.

**Conclusion:**
The Korean travel industry faces challenges stemming from intense competition, dissatisfied
customers, and changing preferences. The call for a Blue Ocean strategy emphasizes the need
for innovative approaches to unlock hidden demand and create a new market space in the
crowded travel industry.
5
**Summary:**

The case study, written by Oh Young Koo for the INSEAD Blue Ocean Strategy Institute,
focuses on challenges and dynamics within the travel industry in South Korea. Bora's
experience with a budget package tour to Sydney serves as a microcosm of issues prevalent
in the industry, including forced shopping, high-pressure activities, and compulsory tipping.
The overview of the travel industry in Korea highlights the growth in outbound travelers and
the dominance of package tours despite the rise of independent travel.

The case emphasizes the dichotomy between package tours and independent travel, outlining
the pros and cons of each. While package tours offer convenience and security, they often
lead to dissatisfaction due to forced shopping and lack of flexibility. Independent travel, on
the other hand, provides freedom but requires more effort in planning and navigating foreign
environments.

The structure of the package tour industry is detailed, showcasing the supply chain involving
Korean travel agencies, inbound travel operators, and local guides. The top travel agencies,
particularly Hana Tour and Mode Tour, dominate the market. Intense competition has driven
down prices, resulting in undifferentiated products and increased marketing costs.

Severe competition has led to a decline in the quality of tour services, dissatisfying customers
who often feel pressured to make unwanted purchases. The case notes a shift in customer
preferences from sightseeing to experiential travel. As a response to dissatisfaction, some
customers are turning to independent travel facilitated by online resources.

The case concludes by presenting two hypothetical travelers, Nari and Eugene, who represent
contrasting preferences between package tours and independent travel. It introduces the Blue
Ocean Hackathon, an exercise for formulating a market-creating strategy to address the
challenges in the travel industry.

**Key Points:**
1. **Industry Overview:** The travel industry in South Korea has experienced significant
growth, driven by outbound travelers. Package tours dominate the market despite challenges.
2. **Package Tours vs. Independent Travel:** The case highlights the advantages and
disadvantages of package tours and independent travel, catering to different customer
preferences.

3. **Industry Structure:** The supply chain of the package tour industry involves Korean
travel agencies, inbound travel operators, and local guides. Top agencies like Hana Tour and
Mode Tour dominate the market.

4. **Competition and Challenges:** Intense competition has led to price wars, reduced
service quality, and customer dissatisfaction. Customers often end up spending more than
expected due to forced shopping.

5. **Shifting Customer Preferences:** Changing customer preferences, facilitated by online

resources, are leading to a decline in the popularity of package tours.

6. **Blue Ocean Hackathon:** The case introduces a hands-on exercise for creating a Blue
Ocean strategy to address challenges and unlock hidden demand in the travel industry.

Overall, the case study provides insights into the complexities and challenges facing the
travel industry in South Korea and sets the stage for exploring innovative solutions through
the Blue Ocean strategy.

6
Summary of the Case Study:

The case study revolves around Bora's experience with a package tour to Sydney, Australia,
highlighting the prevalent issues in the Korean travel industry. Bora, attracted by a low-cost
package, found herself pressured into purchasing various items during the trip, leading to
unexpected expenses. The Korean travel industry, driven by fierce competition, has grown
significantly, with package tours dominating sales despite customer dissatisfaction.

The travel industry in Korea has traditionally offered two main options: package tours and
independent travel. Package tours provide convenience and security but come with
limitations, including compulsory shopping and additional expenses. Independent travel
offers freedom and flexibility but requires more individual planning and decision-making.
The package tour industry in Korea operates through a supply chain involving travel
agencies, inbound travel operators, and local guides. The top travel agencies, such as Hana
Tour and Mode Tour, dominate the market, with a focus on undifferentiated products and
intense price competition. The industry's competitive strategies have led to a decline in
quality, dissatisfying customers and pushing them towards independent travel.

Customers, frustrated with forced shopping and additional costs, have shown a preference for
government intervention to rectify industry malpractices. The increasing popularity of
independent travel, facilitated by online resources, poses a challenge for traditional travel
agencies. The case concludes by introducing the Blue Ocean Hackathon, prompting students
to explore new market-creating strategies in the crowded Korean travel industry.

Elaboration:

1. **Bora's Experience:** Bora's trip to Sydney serves as an illustration of the challenges

faced by customers in the Korean travel industry. The lure of low-cost package tours often
leads to unexpected expenses due to forced shopping and optional activities.

2. **Overview of the Travel Industry in Korea:** The travel industry in Korea has witnessed
substantial growth, driven by factors such as low-cost carriers and a five-day workweek.
Despite the popularity of independent travel, package tours still dominate sales, accounting
for 77% of mainstream travel agencies' revenue.

3. **Package Tours vs. Independent Travels:** The case highlights the pros and cons of
package tours and independent travels. Package tours offer convenience but lack flexibility,
while independent travel provides freedom but requires more individual effort in planning
and navigating foreign environments.

4. **Supply Chain of Package Tour Industry:** The package tour industry operates through a
supply chain involving travel agencies, inbound travel operators, and local guides. The
dominance of top travel agencies, such as Hana Tour and Mode Tour, is emphasized.

5. **Competition in the Package Tour Industry:** Intense competition in the package tour
industry has led to a focus on price segmentation, with little differentiation among products.
Marketing efforts have increased, but undifferentiated products limit the ability to raise
prices.
6. **Disgruntled Customers:** Customers often experience dissatisfaction during package
tours due to compulsory shopping, optional tours, and unexpected costs. This dissatisfaction
has led to a decline in customer loyalty, with many exploring independent travel options.

7. **Blue Ocean Hackathon:** The case introduces the Blue Ocean Hackathon as a hands-on
exercise for students to explore innovative strategies in the crowded Korean travel industry.
The goal is to identify hidden blocks to utility, noncustomers, and ways to reconstruct market
boundaries.

8. **Visualized Recap of the Korean Travel Industry:** The case provides QR codes for
video clips illustrating the challenges and pain points of package tour buyers in the Korean
travel industry.

9. **Conclusion:** The case concludes by highlighting the need for travel agencies to
explore new strategies as the demand for package tours shrinks, and independent travel gains
popularity. The Blue Ocean Hackathon serves as a tool for students to devise innovative
solutions to the industry's challenges.

7
Summary:

The case study revolves around Bora, a traveler who experienced the downsides of package
tours in the South Korean travel industry. The travel industry in Korea has witnessed
significant growth, with a high percentage of Koreans traveling abroad. Two predominant
travel formats exist: package tours and independent travels, each offering distinct advantages
and disadvantages. Package tours, which once dominated the market, are now facing
challenges due to intense competition, leading to lower prices and increased marketing costs.

The supply chain of the package tour industry involves collaboration between Korean travel
agencies, inbound travel operators, and local guides in destination countries. Large travel
agencies, particularly Hana Tour and Mode Tour, dominated the market, while smaller
agencies focused on niche markets. Fierce competition led to a reduction in tour prices and
quality, as travel agencies negotiated lower fees for inbound operators, affecting services and
guide wages.

Customers on budget package tours often experience dissatisfaction due to compulsory

shopping trips, optional tours, and tipping practices. The increasing discontent among
package tourists has resulted in a shift towards independent travel, facilitated by online
information and booking platforms. Despite attempts by travel agencies to diversify and
compete with online platforms, profit margins remain low.

The case study concludes by introducing the Blue Ocean Hackathon, an in-class exercise for
students to formulate a market-creating strategy in the competitive travel industry. It
encourages teams to discover hidden blocks to utility, identify noncustomers, explore market
boundaries, and create a new strategic profile to break the value-cost trade-off.

Key Points:

1. **Travel Industry Growth in Korea:** The Korean travel industry has grown
exponentially, with a high percentage of Koreans traveling abroad, driven by factors such as
low-cost carriers and a five-day workweek.

2. **Package Tours vs. Independent Travels:** The travel industry offers two main formats—
package tours and independent travels—with distinct advantages and disadvantages, catering
to different customer preferences.

3. **Package Tour Industry Challenges:** Intense competition has led to reduced prices,
increased marketing costs, and a decline in the quality of package tours. Large travel agencies
dominate the market, negotiating lower fees for inbound operators.

4. **Customer Dissatisfaction:** Budget package tourists often experience dissatisfaction

due to compulsory shopping trips, optional tours, and tipping practices. Customers seek
change, with a growing preference for independent travel.

5. **Blue Ocean Hackathon:** The case study introduces a hands-on exercise for students to
create a Blue Ocean strategy, identifying hidden blocks to utility, noncustomers, market
boundaries, and a new strategic profile.

6. **Shift to Independent Travel:** Discontent among package tourists has led to a shift
towards independent travel, facilitated by online information and booking platforms,
challenging travel agencies to compete.

Overall, the case study highlights the challenges faced by the Korean travel industry and
encourages students to think innovatively through the Blue Ocean Hackathon exercise.
8
**Summary:**

The case study discusses the challenges and dynamics within the travel industry in South
Korea, focusing on the package tour segment. Bora, a typical package tourist, experiences
unexpected expenses and dissatisfaction due to compulsory shopping and optional tours. The
Korean travel industry has traditionally offered package tours, dominating 77% of sales, with
fierce competition leading to reduced prices and undifferentiated products. The top two travel
agencies, Hana Tour and Mode Tour, control over 50% of the market.

**Key Points:**

1. **Korean Travel Industry Overview:**

- Koreans travel abroad frequently, with 90% having traveled in the past two years.
- The industry has grown significantly, offering cheaper and diverse tour products.
- Two primary travel formats: Package Tours and Independent Travels.

2. **Package Tours vs. Independent Travels:**

- Package Tours offer convenience, efficiency, and security but lack freedom and flexibility.
- Independent Travels provide freedom and customization but may lack security and ease.
- Package tourists often face compulsory shopping and optional tours, leading to
unexpected expenses.

3. **Package Tour Industry Structure:**

- The industry involves travel agencies, inbound travel operators, and local guides.
- Top 10 travel agencies dominate the market, with Hana Tour and Mode Tour holding a
significant share.

4. **Competition and Challenges:**

- Intense competition has led to price reductions and undifferentiated products.
- Marketing costs are high, and efforts to target specific customer segments are easily
imitated.
5. **Customer Dissatisfaction:**
- Package tourists face unexpected expenses and dissatisfaction due to compulsory
shopping.
- Guides rely on commissions from shops, leading to pressure on tourists to make
purchases.
- Dissatisfied customers are increasingly turning to independent travel options.

6. **Blue Ocean Hackathon Exercise:**

- The case study concludes with an invitation to a Blue Ocean Hackathon, encouraging
students to explore innovative strategies in the crowded travel industry.

**Implications and Questions:**

- How can travel agencies address customer dissatisfaction and regain loyalty?
- What strategies can be employed to differentiate package tours and create unique value?
- How might the industry adapt to changing customer preferences and the rise of independent
travel?

The case study provides insights into the challenges and opportunities for innovation within
the Korean travel industry, prompting readers to consider alternative strategies to create a
"blue ocean" of uncontested market space.

9
Summary:

Bora, a South Korean traveler, experiences the common phenomenon of package tours in the
Korean travel industry. These tours, initially attractive due to low prices, often lead to
additional and sometimes forced purchases, creating dissatisfaction among customers. The
Korean travel industry has grown significantly, with package tours dominating sales.
However, changing customer preferences, dissatisfaction, and competition from independent
travel options pose challenges.

The industry structure involves Korean travel agencies developing and advertising tour
products, which are then executed by local operators in destination countries. The top two
agencies, Hana Tour and Mode Tour, hold a significant market share. Despite intense
competition, undifferentiated package tour products have led to price wars, forcing agencies
to reduce fees for inbound operators, affecting service quality.

Customers, especially those on budget tours, face compulsory shopping and optional
activities, increasing their overall spending. Dissatisfaction has driven some customers to
independent travel options, facilitated by online resources. While the independent travel
market is competitive, package tours face declining demand and profitability.

The case study concludes by presenting two fictional characters, Nari and Eugene,
representing potential customers with different needs. It introduces the Blue Ocean
Hackathon, a hands-on exercise to develop a market-creating strategy using Blue Ocean Shift
tools.

Elaboration:

1. **Package Tour Challenges:**

- Customers on package tours often face unexpected and compulsory shopping trips and
optional activities, leading to increased spending.
- Guides rely on commissions from shops and activities, affecting the quality of tour
services.

2. **Korean Travel Industry Overview:**

- The industry has grown significantly, driven by frequent overseas travel among Koreans.
- Package tours, offered by travel agencies, dominate sales despite changing customer
preferences.

3. **Industry Structure:**
- Package tours are developed by Korean travel agencies and executed by local operators in
destination countries.
- Top agencies, Hana Tour and Mode Tour, hold a substantial market share.

4. **Competition and Pricing:**

- Intense competition has led to price wars among travel agencies.
 - Undifferentiated package tour products have resulted in reduced fees for inbound
operators, impacting service quality.

5. **Customer Dissatisfaction:**
- Customers express dissatisfaction with unexpected shopping, optional activities, and the
pressure to spend more.
- Dissatisfied customers are migrating to the independent travel market, facilitated by
online resources.

6. **Blue Ocean Hackathon:**

- The case study introduces Nari and Eugene as fictional characters representing different
customer needs.
- The Blue Ocean Hackathon is presented as an exercise to develop a market-creating
strategy for the Korean travel industry.

In summary, the Korean travel industry faces challenges such as dissatisfied customers,
declining demand for package tours, and intense competition. The Blue Ocean Hackathon is
suggested as a way to formulate a market-creating strategy and unlock hidden demand in this
competitive landscape.

10
**Summary:**

The case study discusses challenges and issues faced by the travel industry in Korea,
particularly focusing on package tours. Bora, a traveler, experienced unexpected expenses
and pressure to make purchases during her supposedly budget-friendly package tour to
Sydney. The Korean travel industry, marked by fierce competition, has seen a decline in
customer satisfaction due to compulsory shopping, forced extra activities, and tipping.

The Korean travel industry, which has grown significantly over the years, primarily offers
two travel formats: package tours and independent travels. Package tours, dominated by
major agencies like Hana Tour and Mode Tour, provide convenience but lack flexibility.
Independent travels offer freedom but require more planning. While independent travel has
gained popularity, package tours still dominate in terms of sales and profit margins.
The package tour industry faces challenges such as undifferentiated products, intense
competition, and declining profit margins. Companies spend heavily on marketing, and the
price of package tours has decreased over time. Severe competition has led to cost-cutting
measures, affecting the quality of services, tour guides, and overall customer satisfaction.

Customers, frustrated with compulsory shopping and extra expenses, are turning towards
independent travel. The study emphasizes the need for travel agencies to innovate and create
a new market space. The Blue Ocean Hackathon is introduced as an exercise to guide
students in formulating a market-creating strategy, exploring hidden blocks, identifying non-
customers, and envisioning a new strategic profile.

**Elaboration:**

1. **Package Tours vs. Independent Travels:**

- Package tours offer convenience, efficiency, and security but lack flexibility and local
experiences.
- Independent travels provide freedom, customization, and social interaction with locals but
may be time-consuming and challenging.

2. **Overview of the Travel Industry in Korea (2012):**

- Koreans travel abroad frequently, with the growth attributed to low-cost carriers and
shorter workweeks.
- The travel industry has expanded, offering cheaper and varied tour products, but customer
dissatisfaction persists.

3. **Package Tour Industry:**

- The supply chain involves Korean travel agencies developing tour products, which are
then delivered by inbound travel operators and guides in destination countries.
- The top 10 travel agencies dominate the market, with Hana Tour and Mode Tour holding
over 50% of the package tour market.

4. **Competition in the Package Tour Industry:**

- Market competition involves segmentation by price, offering tour products at various
price points.
- Undifferentiated products and intense competition have led to reduced profit margins,
increased marketing costs, and declining service quality.
5. **Disgruntled Customers:**
- Customers on package tours often face unexpected expenses, compulsory shopping, and
forced extra activities, leading to dissatisfaction.
- Customers are migrating to independent travel due to frustration, with 83% supporting
government intervention to rectify malpractices.

6. **Blue Ocean Hackathon:**

- The Blue Ocean Hackathon is introduced as a hands-on exercise for creating a market-
creating strategy in Korea's crowded travel industry.
- Steps include discovering hidden blocks, identifying non-customers, exploring market
boundaries, breaking the value-cost trade-off, and envisioning a new strategy.

7. **Current Industry Landscape:**

- The travel industry in Korea is at a crossroads, with package tours facing declining
demand and profitability, while independent travel is becoming intensely competitive.

8. **Challenges and Opportunities:**

- The case study highlights the need for travel agencies to innovate, address customer
dissatisfaction, and create a new market space to unlock hidden demand.

The study encourages students to explore alternatives to conventional market competition and
devise strategies for profitable growth in the changing landscape of the Korean travel
industry.

11
**Summary:**

The case study, authored by Oh Young Koo under the supervision of W. Chan Kim and Renée
Mauborgne at INSEAD, discusses the challenges and dynamics in the travel industry in South
Korea, particularly focusing on package tours. Bora, a traveler, experienced unexpected
expenses on a supposedly budget-friendly package tour to Sydney, Australia. The competitive
landscape in the Korean travel industry has led to a race to the bottom in package tour prices,
with travel agencies compensating for low prices through forced shopping, optional activities,
and tips, causing dissatisfaction among customers.

The travel industry in Korea has seen significant growth, with Koreans traveling abroad more
frequently than Chinese and Japanese. The market is dominated by package tours and
independent travels, each catering to different customer preferences. Package tours offer
convenience but often come with hidden costs and a lack of flexibility. Independent travels
provide freedom and customization but require more planning and navigation.

The structure of the package tour industry involves collaboration between Korean travel
agencies and local operators in destination countries. The market is highly competitive,
leading to price wars and reduced profitability. As a result, quality of services, including tour
guides and local experiences, has declined.

The case study presents the dilemma faced by travelers like Nari and Eugene, who seek
meaningful and authentic experiences but struggle with the limitations of existing travel
options. The authors introduce the concept of a Blue Ocean Hackathon, encouraging students
to explore innovative strategies to create new market spaces and unlock hidden demand in the
travel industry.

**Key Points:**

1. **Package Tour Challenges:** Travelers in Korea face issues with hidden costs, forced
shopping, and optional activities on package tours, leading to dissatisfaction.

2. **Industry Overview:** The Korean travel industry has grown significantly, with a
majority of travelers choosing between package tours and independent travels. Package tours
dominate the market but face challenges.

3. **Market Structure:** The package tour industry involves collaboration between Korean
travel agencies and local operators, with significant market share held by top agencies like
Hana Tour and Mode Tour.

4. **Competition and Price Wars:** Intense competition has led to reduced prices for
package tours, impacting profitability. Companies resort to cost-cutting measures, affecting
the quality of services.
5. **Changing Customer Preferences:** Customers increasingly seek authentic experiences
and are frustrated with the limitations of traditional package tours, leading to a shift toward
independent travel.

6. **Blue Ocean Hackathon:** The case study introduces the concept of creating a Blue
Ocean strategy to address the challenges in the travel industry and unlock new demand.

Overall, the case study highlights the need for innovative strategies to revitalize the travel
industry in Korea and cater to evolving customer preferences.

12
**Summary of the Case Study: "Revitalizing the Korean Travel Industry"**

**Introduction:**
The case study, authored by Oh Young Koo under the supervision of W. Chan Kim and Renée
Mauborgne at INSEAD, explores the challenges faced by the Korean travel industry,
specifically focusing on package tours. Bora's experience is emblematic of a common
phenomenon where travelers are enticed by low-cost package tours but end up spending more
on forced shopping and optional activities.

**Background:**
The Korean travel industry has seen significant growth, with Koreans traveling abroad more
frequently than Chinese and Japanese. The market is dominated by package tours and
independent travels, each offering a distinct travel experience. Package tours provide
convenience and security but often come with drawbacks such as forced shopping and tight
schedules.

**Structure of the Package Tour Industry:**

The package tour industry operates through a supply chain involving travel agencies, inbound
travel operators, and local guides. The top 10 travel agencies, particularly Hana Tour and
Mode Tour, hold a significant market share. However, the industry faces challenges due to
fierce competition, leading to lower prices and reduced quality of services.

**Competition and Marketing Strategies:**

Competition in the industry follows a typical strategy, segmenting the market by price and
offering products at various price points. Heavy marketing expenditures, promotions through
alternative channels, and efforts to target specific customer segments have not alleviated the
challenges.

**Challenges and Discontent among Customers:**

Package tour customers often experience dissatisfaction due to unexpected shopping
excursions, forced tipping, and optional activities. The pressure to buy and the lack of
genuine local experiences lead to extra spending. Dissatisfied customers increasingly turn to
independent travel, facilitated by online platforms offering information and bookings.

**Market Trends and Consumer Preferences:**

The trend indicates a shift from traditional sightseeing-focused travel to a desire for authentic
experiences. Despite the growing popularity of independent travel, travel agencies continue
to focus on package tours, which account for a significant market share in terms of sales and
profit margins.

**The Blue Ocean Hackathon:**

The case study concludes by introducing a hands-on exercise, the Blue Ocean Hackathon,
challenging participants to create a market-creating strategy for the Korean travel industry.
The exercise involves discovering hidden blocks to utility, identifying noncustomers,
exploring ways to reconstruct market boundaries, breaking the value-cost trade-off, and
envisioning a new strategy compared to the existing industry standard.

**Conclusion:**
The case study underscores the challenges faced by the Korean travel industry, primarily in
the package tour segment, and sets the stage for exploring innovative strategies to revitalize
the industry and create a blue ocean of uncontested market space.